Thursday, November 20, 2014

*To revel in the full majesty of this blog's title, please mispronounce redux as re-ducks.

Now go grab a pot of coffee and a bowl of popcorn. This is gonna be a long one.

Back in 1978, when I was but a wee lad of 8 (the smarter among you can probably guess my birth year if you're good at math) a book came out by a guy named George Fox. It was called Amok.

Even at that tender young age, I'd recently read Jaws (and you wonder why I'm a thriller writer?) and I picked up Amok at my local library in their paperback exchange rack. I selected it because of the cover; two muscular arms swinging a bloody sword, and the tagline: The blood-chilling bestseller more terrifying than JAWS.

Speaking of non-sequitors, I recently came upon Paul Biba, an attorney and the former editor-in-chief of Teleread. Paul has an amazingly comprehensive Twitter feed. If you're at all interested in publishing, ebooks, and/or the laws that effect them, follow Paul. I asked Paul a few questions, which we'll get to in a moment.

This is coming off the heels of an exchange that several authors, myself included, had with Philip Jones of The Bookseller, where we tried in vain to get him to act like a journalist.

How does all of this tie together? Pretty well, actually. Let's start with The Bookseller "story" about Preston. Their unedited article in biased bold font, my replies in common-sense normal font.

Campaign group Authors United will continue its “efforts to persuade” the Antitrust Division of the Justice Department in the US to look into Amazon’s market practices, saying there are "still many open questions about Amazon's market power".Joe sez: Amok was based on real-life events, about a Japanese soldier on a small island in the Philippines 30 years after WWII, who was never told the war ended. He's called Amok because he keeps running amok, killing people, even though the Axis had already lost the war.

You can see why I remembered this book while reading this article about Preston.The group was set up by American author Douglas Preston during the dispute between Amazon and Hachette Book Group (HBG) in America over e-book terms, which was resolved last week.Joe sez: Douglas Preston, who insisted he had never taken sides in the Hachette/Amazon dispute, and who doesn't seem to know that this dispute has been resolved, is still fighting the war in his head, and apparently trying to use Authors United as a bludgeon to get his way; namely, to get media attention to convince the DOJ to overlook 120 years of antitrust law and go after Amazon.

In a letter to the writers who signed petitions trying to persuade Amazon to agree terms with HBG - including names such as James Patterson, Stephen King, Tracy Chevalier, Sophie Hannah and Philip Pullman - Preston wrote that the deal between the two companies, which allows HBG to set consumer prices for its books, was “not unreasonable” as he understood it.Joe sez: No deal is "unreasonable" if both parties willingly signed it. Besides, Hachette practically bragged about the deal.

And Preston's comment? That the deal is "not unreasonable". Which is the most unreasonable thing he's said on this issue, and that's saying something.“I want to thank all of you for your courage in facing down Amazon,” he continued. “Each one of you risked retaliation and potential damage to your career to sign our letters. As a Hachette author, I want especially to thank those many non-Hachette authors who had little to gain and a great deal to lose by taking a public stand.”Joe sez: It was certainly brave of multi-millionaires like Preston, King, Patterson, and Child to speak out against Amazon, where they risked losing...

Um...

Uh...

What did they have to lose, exactly?

What did any of the AU signatories have to lose?

Did they fear the wrath of Amazon?

True, AU's incorrect stance was that Amazon had targeted authors. Maybe they actually thought, by speaking out against Amazon, they'd also become targets of that nefarious, illegal activity known in hushed circles as capitalism. Maybe Amazon, irritated by their bold actions, would do something reprehensible, like sell their books at their publishers' MRSP, instead of at a discount.

Or maybe Amazon would do nothing, because it doesn't target authors. Which is what happened; nothing. But medals all around anyway.But Preston said the settlement did not change the problem that “one corporation now controls more than 50% of the book market in the United States -- a corporation, moreover, that in our view used its market dominance in an irresponsible and destructive way”.Joe sez: So Preston, who insisted AU was there to protect authors, now wants AU to protect the industry from a corporation that sells more books than anyone else.

"They sell too many books! Make them stop!" says an author who makes his living selling books.

What does this lapse in logic remind me of? Oh yeah, my old post Presumed Inane, where former Authors Guild prez Scott Turow explained why we should fear Amazon.

The Big 6 were worried Amazon would no longer pay them $15 per ebook, so they forced Amazon to take a deal where Amazon only paid them $7 an ebook.

Bask in the logic of millionaire status-quo legacy authors.

He confirmed that Authors United would still be pursuing its aim, announced earlier this year, of asking the Justice Department to open an inquiry into Amazon.Joe sez: Dear Doug Preston. I'd like you to sell my ebooks on your website, www.prestonchild.com. You'll sell them for $12.99 each, and you get to keep 30%. You'll do this because I said so. If you boycott or sanction the sale of my books on your site, or try in any way to make them hard for your readers to find, I'm telling the DOJ on you.Preston said: “There are still many open questions about Amazon's market power. Those questions are best explored, not in an atmosphere of confrontation and high emotion, as we have just passed through, but in a reflective way that considers the long-term economic health of the book industry and the ability of authors to earn a living -- as well as the larger issues of freedom of speech, diversity and healthy competition in the marketplace.Joe sez: "There are still many open questions about Authors United's actual intentions, since they've completely abandoned their original 'we take no sides we just care about authors' stance, and switched focus to what we knew all along: protecting their corporate masters' paper distribution oligopoly. Those questions are best explored by using the media, via parrotting lapdogs such as The Bookseller, who also have an anti-Amazon bias and will repeat whatever we tell them without any opposing views."“For this reason, we believe it is vital to continue our effort to persuade the Antitrust Division of the Justice Department to look into Amazon's market practices. Our letter, and our behind-the-scenes work, is well in process and we feel it makes sense to see it through.”

Joe sez: Okay, I'm pretty sure Preston has no clue how antitrust law works, but we'll get to that in a moment.

First, I want to point out that the above text in bold is the entirety of The Bookseller piece.

Notice anything odd? I mean, beyond how silly it is.

How about the article's singular focus on reporting what Preston is doing, without even bothering to look at any other side of this situation?

Who could The Bookseller have talked with to round out this story? I can think of any number of authors who have publicly sided against Preston. Amazon might not comment, but at least The Bookseller could have said they tried to reach Amazon. How about asking Preston himself some tough questions, such as why he insisted he hasn't been taking sides and now obviously is? Or why he seems less than elated that the negotiations are over? Or if he thinks his silly organization made a difference?

How about asking a reader what they think? Or getting the opinion of a lawyer versed in antitrust law? Or asking anyone at all anything at all, to offer at least the semblance of an alternative opinion?

The Bookseller tends to do this a lot. So much so that on a previous piece, a few authors decided to point this very thing out in the comments.

The Bookseller's editorial editor, Philip Jones, replied to many of the comments. The piece can be summed up thusly:

Amazon Anonymous, a campaign group, doesn't want people to shop at Amazon because Amazon treats workers, society, and other businesses unfairly, and Amazon doesn't pay their fair share of taxes.

That's pretty much it. Go read it if you want to, but there isn't much more. Where it gets interesting is the comments.

David Gaughran: What is the average salary of a Waterstones employee? How much does Waterstones pay all those students they hire for Christmas? How many unpaid interns are employed by publishers? What's the average starting salary for someone in publishing? What is the pay like in all those book printing facilities that publishers own in Mexico, India, China, and Indonesia?

(zing!)Philip Jones: David, why don't you find out the answer to these questions, begin your own campaign based on fact rather than insinuation, gather 55,000 signatures from those supporting you, and then we can report it. With objectivity.

(avoidance!)

David Gaughran: You *choose* to report on Amazon's pay rates, not on those of other companies in publishing. You *choose* to report on Amazon's tax affairs, but not those of Apple or Harlequin.

David Gaughran: You have written plenty on Amazon's tax affairs, but I haven't seen a single article on Apple's tax affairs or Harlequin's tax affairs.

I wrote about both.

And it's interesting you should mention my "Publishing Is Rotten To The Core" piece because it talks about widespread exploitation of authors - something The Bookseller also never covers.

One part of that article dealt with the corporate structures Harlequin uses to reduce its tax bill - as it used those some corporate vehicles to reduce the effective royalty rate it was paying a large group of authors to the low single digits. I don't remember an article in The Bookseller on that either.

Another part of that article dealt with Penguin Random House-owned Author Solutions and the huge scamming that has taken place there. I don't remember an article in The Bookseller covering that story either.

But keep pretending you are objective.

(super-punch kazowie!)

Philip Jones: In both the Harlequin and Author Solutions situations there are legal cases pending in the States, and we will report on these as they progress. We have written plenty about Author Solutions as you know since you also left a number of comments under those pieces too. Our original investigation into Amazon's tax arrangements and the Guardian's follow-up helped examine the way international conglomerates exploit tax loopholes, with subsequent pieces written about Apple, Google and even Pearson. I'm just sorry that we don't meet your exacting standards in giving Amazon a pass at every opportunity.

(unfounded opinion ad hominem!)

David Gaughran: It's a hilarious act of projection when Philip Jones insinuates that anyone disagreeing with him is a shill. The constant drumbeat of anti-Amazon propaganda emanating from The Bookseller is clear to anyone with half a brain. And I'm a little concerned that the editor of The Bookseller doesn't appear to know how Google works.

Nevertheless, unlike Philip Jones has done himself, I will actually engage with the points he has made.

Amazon uses a variety of corporate structures and vehicles to reduce the amount of taxes it pays. These methods are legal. Whether you think they are ethical or fair or not is up to you, but they are legal.

These structures were pioneered by Apple in the 1980s, and are used by most large international corporations (including those in publishing). One of the most popular is the Double Irish, and that's the primary reason Dublin has become such a tech hub with companies like Intel, Microsoft, Google (my former employer), Twitter, Facebook etc. all setting up their Euro headquarters there.

If you are going to start boycotting companies for using these corporate structures, then you need to stop using the internet and using any major bank. Which is just one of the reasons why this boycott is stupid and hypocritical.

However, I'm not saying nothing should be done, or that these companies shouldn't pay more tax. In my opinion they should, but this requires governmental (and, in fact, intergovernmental) action.

Philip Jones knows all this because I have emailed him on successive occasions to explain all this to him. And yet every article The Bookseller writes ignores all the other companies who use the same (legal) methods as Amazon to reduce their tax bill. And every article repeats the fallacy that corporation tax is somehow based on sales (rather than profits).

It's revealing that making the above argument defines me in Philip's mind as an Amazon shill.

(boom goes the dynamite!)

Philip Jones: I've no idea what you are talking about David. Who have I accused of being a shill?

(oblivious!)

Also, both you and Joe seem intent on building the same straw man here. The Amazon Free Challenge is an ethical campaign. There is a difference between what is legal and what is ethical. Amazon Anonymous, as far as I can tell, is asking consumers to think about that. Perhaps when they do, governments will act. In the meantime, as consumers we have a choice about where we spend our money.

You've emailed me about Amazon's tax avoidance on many occasions, yes, and the last time I sent you the PDF of our original report, which examined in forensic detail how Amazon minimises profits and therefore its tax. I've heard nothing from you on this since, certainly no attempt to critique that piece. Your continuing to attempt to imply that we don't understand how corporation tax is applied is ridiculous.

And again, fyi, the key paragraph is available in my comment below, as published by the Guardian in 2012: "According to the SEC filings, UK sales that year were between £2.3bn and £3.2bn. Amazon in the US has earned an average 3.5% profit margin over the past three years. UK sales over the past three years, according to the SEC filings, were between £7.6bn and £10.3bn. If the same profit margin was applied, this would have generated taxable profits of £266m-£360m and yielded notional UK corporation tax of up to £100m.

However,in the nine years between 2003 and 2011, the UK-registered company has reported a cumulative net tax bill of just £3m – of which £1.9m was incurred in 2011."

By all means continue to engage with Emily, Amazon Anonymous and their 55,000 signatories about why the "boycott is stupid and hypocritical". We'll continue to report their activities.

I responded more fully below to other points raised.

(Joe sez: The Amazon tax avoidence meme was refuted by these two links proved by the palindromish Talin Nilat:

Is that not the same in the UK? Was this even checked? Was Amazon asked to comment?

David brought up many good points. In an article about low wages, how does Amazon compare to others?

Do you pay extra taxes, Caroline and Phil? Or do you pay as little as the law allows? I claim my wife and son as dependents... does that mean I'm not paying my fair share? Are they not paying their fair share?

If the Bookseller believes giving one-sided coverage of an anti-Amazon group is beneficial to its readers, can you tell us why? The View From Nowhere isn't good journalism.

(j'cusse!)

Philip Jones: I don't pay extra taxes, I pay the taxes that are due (as far as I know). Amazon doesn't, and doesn't try to.

We examined this first in 2012, and other newspapers have examined it since.

Amazon's working practices in a range of facilities across the world have been well documented by better commentators than you or I Joe. Here though we are reporting on the activities of an Amazon campaign group. But you'd rather we walk on by because there isn't also a story about an anti-publishing group to report on today?

Amazon never comments publicly, as you know. I am more than happy to to take a piece or comment from Amazon at any time about the issues we raise in The Bookseller.

(lazy research!)

Joe Konrath: So the UK is purposely allowing Amazon to avoid paying taxes--in flagrant violation of the law--while other large companies do pay? Have you followed the legal action and proceedings? Or do laws exist that allow Amazon and others to pay taxes on profits rather than gross sales? Last I checked, I could deduct my expenses on my taxes and only pay on what I net. Is it like that in the UK? Retailers only pay taxes on profits and deduct expenses?

I'm glad Amazon's working practices had been well documented, and each of them handily linked to in this article for easy reference.

Just to be clear--if I raise $7000 to urge people to start pressuring The Bookseller to actually do some reporting, would you cover that story?

Do you recall the six ethical standards of journalism? Hint: truthfulness, accuracy, objectivity, impartiality, fairness and public accountability.

Was this piece objective and impartial? Was it fair? Where are the numbers and data that back-up the claims AA is making? You know, like actually reporting the wages and benefits and conditions at Amazon? It wouldn't have even required digging--Caroline could have asked Emily, who no doubt has reams of information showing how bad Amazon is.

Where's the counter-viewpoint from Amazon customers or writers? How about interviewing an Amazon employee that enjoys working there? Do any? Is there a single happy Amazon employee in the UK? What is a Living Wage, how many in the UK earn it? How many companies in the UK provide it?

I'm not a reporter. I'm not a journalist. I'm just a blogger, and I make zero dollars doing this. But I still shoot for higher standards than this article does.

Why didn't you comment on the link I offered, showing Amazon pays employees 30% higher than competitors, and also offers them a bonus to quit?

"Amazon never comments publicly, as you know."

I know. Never. Except for the many comments it made during the Hachette negotiations, as you know. If you forgot, I'll provide a few links:

Philip Jones: Of course, Joe, sorry, we are all wrong, you are right. Let me call the Amazon PR for a comment right now . . . LOL

(lose!)

Joe Konrath: Nice job refuting all of the points I made, Philip.

(sarcasm punch!)

Barry Eisler: Hi Philip, coming here late and probably after that magic “egos have already engaged” moment we all have to watch out for, but for what it’s worth, I think all David’s trying to say is that your article would have been more useful to your readers if you had provided some context.

I’m happy to assume for the sake of argument that the activities of this group Amazon Anonymous are newsworthy — that’s something reasonable people can differ on and that probably isn’t subject to proof one way or another. But as a Bookseller reader, immediately I wonder if the group's accusations have merit. And one relatively easy and straightforward way of addressing that issue is to compare Amazon’s treatment of its workers with the treatment offered by other, similarly situated retailers. Maybe other retailers treat their workers far better than Amazon does, which would suggest the AA accusations have real merit. Or maybe Amazon’s treatment is on a par with, or significantly better than, those of its competitors, in which case one might reasonably wonder what is really motivating AA. But your readers can’t come to informed conclusions about any of this if you, as a journalist, simply report “a group said this and did that” and don’t attempt to provide some context.

I think anyone who’s ever read my posts on publishing or heard my keynotes knows I think on balance Amazon has been a force for good in publishing. But I’m not suggesting you add context that supports my views — just that you add context that illuminates whatever is actually going on. It might be that Amazon treats its workers exceptionally badly. If so, as a Bookseller reader, I want to know that — and without any context, I can’t.

Or, to put it another way, if you had provided some context, would your article likely have been more illuminating and useful to your readers? If the answer is yes, why not try to provide a little of that context in the future?

Philip Jones: Absolutely Barry, and to your last point maybe those vocal commentators who go to great lengths to point out how Amazon has been a force for good, while invariably trying to shout down (sorry, fisk) any commentary that strays from that orthodoxy could also consider how dangerous this is.

And, really. Sometimes a news story is just a news story.

(embarrassing!)

Barry Eisler: I don't get it... how can thoroughly and carefully responding to an article point by point be understood as an attempt to "shout down" an article? Do you feel that anyone here is trying to shout you down by engaging your points in the comments?

And even if we assume for the sake of argument that a thorough, careful response is some sort of "shout down" and therefore worthy of censure, what would that have to do with your own journalistic standards? Why excuse your own shortcomings because you might be able to identify them elsewhere? Why not strive for the best performance you're capable of based on your own ideals?

And respectfully, "a news story isn't a news story" isn't really a reason. I don't even know what it would mean, beyond being a fairly weak excuse for a lack of journalistic examination and context that at best results in something akin to stenography. I believe you can do better and hope you'll agree!

(victory cigar!)

Joe Konrath: So Barry asked you politely to add some context, and you didn't add any.

Sometime propaganda is just propaganda. When you can't or refuse to defend it, that's your first hint.

(insult to injury!)

Philip Jones: Here is some background for y'all.

(much needed rebuttal!)

A BBC report into its Panorama investigation into Amazon's working conditions is available here:

I'm not saying all 61,900,000 are stories about how badly Amazon treats its workers, but I scrolled through more than 30 pages of this stuff before the reports (some dating back into the past decade) started to thin out.

And here by contrast is a Google search for working conditions at Waterstones, which brings up no adverse comment about Waterstones working conditions.

And from that report: the campaign, which has backing from a range for organisations including Ethical Consumer, the GMB union and UK Uncut, aims to illustrate the ‘human cost of Amazon’s business model.’

Note the line in many of these stories: The Amazon press office has yet to respond to a request for comment.

Finally, here is the original piece the Guardian published about Amazon's tax situation in the UK, based on The Bookseller's much more detailed report (happy to send a PDF of this to anyone who emails me, as I have already have to David Gaughran).

"According to the SEC filings, UK sales that year were between £2.3bn and £3.2bn. Amazon in the US has earned an average 3.5% profit margin over the past three years. UK sales over the past three years, according to the SEC filings, were between £7.6bn and £10.3bn. If the same profit margin was applied, this would have generated taxable profits of £266m-£360m and yielded notional UK corporation tax of up to £100m.

However, in the nine years between 2003 and 2011, the UK-registered company has reported a cumulative net tax bill of just £3m – of which £1.9m was incurred in 2011.

The Guardian asked Amazon why it paid no UK corporation tax on the £3bn it takes out of the economy. The company declined to answer any specific questions on its tax affairs."

Now having provided the context to a news story about the latest development in a long-running consumer ethical campaign about Amazon, perhaps we can we get back to the "real story" of discussing The Bookseller's news values?

(link wars!)

Joe Konrath: Here's how a discussion should work, Philip. Rather than ignore the links that others have posted here, like you've done, I'll actually follow the links you provided and comment on them.

In a statement, Amazon said it employs more than 5,000 permanent employees across the UK as well as thousands of temporary staff, adding it paid "all applicable taxes in every jurisdiction that it operates within"."We are proud of providing our associates with a safe and positive working environment, which includes on-the-job training and opportunities for career progression," the firm said.The retailer offered its employees a "competitive package" including performance-related pay, with permanent employees also offered benefits including healthcare and a personal pension plan, it added.

Actually, sarcasm aside, the article is fascinating in two ways. First, because you insisted Amazon never responds, and you just linked to one of their responses. Irony is funny. Second, that BBC article presented an opposing viewpoint, which this BookSeller article does not. That's why we're having this back-n-forth. If you presented this article like the BBC presented theirs, this comment section would be empty.

Next you compare two Google searches, which somehow convinces you beyond a reasonable doubt that Amazon is bad and Waterstones is awesome.

Nicely done. Next time I get a speeding ticket and go to court, I'll say, "But your honor, speed limits don't make any sense. I Googled 'autobahn' and found 3 million sites praising the lack of a speed limit in Germany."

I'll call the The Google Defense, where simply saying how many hits a search term gets determines ultimate truth.

Protesters demand Amazon pay a living wage. We get this all the time in the States. My reply is always the same: Protesters need to vote politicians into office who will raise minimum wage. In my state of Illinois, voters just did that, and minimum wage was raised to $10 an hour. Democracy in action, except... it's still less than Amazon paid that BBC undercover nightshift guy in the above article.

The "story" continues. Really, it's embarrassing how biased these pieces are. When a reporter only presents one side of an issue, that reporter is failing readers. Go upthread and look again for the six ethical standards all journalists need to adhere to. Because The Bookseller is failing miserably.

Let me also point something out. I think working in a warehouse sucks, and I think low wages suck, and I think huge corporations squeezing the lives out of menial labor workers is bad for the world. But we need to blame our own countries, our lawmakers, and ourselves for allowing these things to persist. As a rule, I like protests. They help coalesce public sentiment, so maybe the politicians start paying attention. When there are a group of people demanding to be paid more money, it's newsworthy. But let's see both sides of the issue. How many people does Amazon employ? How many new jobs has it created? How does it pay compared to other companies? How many people like working at Amazon,and appreciate the opportunities it has offered? Report the news, but present the whole story.

You repeating "Amazon is bad" over and over isn't the whole story. I'd argue it isn't a story at all. It's a biased agenda that is sloppily executed and unhelpful.

Now please, take a shot at all of the links others have posted in this thread.

(face the music!)

Philip Jones: Thanks for taking the time to go through them all Joe. Shame you spoil it in the penultimate paragraph. We do not repeat "Amazon is bad" over and over. We report on other people saying so, including campaign groups, unions, and BBC documentary makers.

(no difference!)

If you can't distinguish between news and commentary, then we all might as well go home.

If I wanted to write that Amazon was bad, I would do so in my Leader, or in a blog comment. I don't. It's not my view, and it's not the line The Bookseller takes.

I did not provide the Google links to show that Amazon was bad, and Waterstones was good - this is not play-group, I did it to show that the weight of reporting on this issue is focused on Amazon, and rightly so. The business has some serious questions to answer—partly because of the large numbers of workers it employs in low-skilled and low-paid positions and the opaque nature of its employment practices.

Reverse back to 2009/10, and you'll see a bunch of reports in The Bookseller about how 'bad' Waterstones' distribution had become. That was the issue of that day, just as Amazon is now a major focus of today.

Of course it is our duty to report the other side, I wish Amazon provided us with the kind of commentary to do that. There are, however, plenty of stories on this website reporting Amazon's positive work, including new distribution centres and new central London offices: job creation often backed by commentary from Amazon executives and MPs.

I'm sure some of these stories, often culled from press releases, also fail to meet your exacting template of what a news story should look like. But I don't see you (or Barry, or David) commenting on them, or giving me lessons about them.

The subject of this news story is Amazon Anonymous, and as I said to David, how about engaging with them and the 'ethical' questions they are raising about Amazon?

(David and I aren't reporters! That's your job! Zing!)

Joe Konrath: We do not repeat "Amazon is bad" over and over. We report on other people saying so, including campaign groups, unions, and BBC documentary makers.

Is that newsworthy, too? If 5000 people were opposing rain, would that be worthy of an article?

If it was, would The Bookseller even think to add: "Rain, by the way, is necessary for humans to survive since it is essential for crops to grow".

I think not.

Of course it is our duty to report the other side, I wish Amazon provided us with the kind of commentary to do that.

And I wish you'd actually talk to an Amazon warehouse employee who has had a positive experience, or a lawmaker who passed the legislation that allows Amazon to sell everything through Luxembourg to minimize taxes, or the homeless person who didn't have a job but now does because Amazon employed them. If you self-identify as a journalist, act like one. Make some phone calls. Ferret out the story. Or else, as Barry said, you're just a stenographer. A stenographer with blatantly obvious bias.

The subject of the news story is Amazon Anonymous.

If the subject was "Alcoholics Anonymous" would you think to maybe, I dunno, interview an alcoholic? Or someone related to or effected by alcoholics? Or some doctors who can report on the damage alcohol does? Or some lawmakers who support the laws regarding alcohol?

Here's a "story" for you to "report":

"I think The Bookseller is biased against Amazon," says author JA Konrath. "Several other people agree with me."

Don't bother seeking out an opposing viewpoint (as if you'd bother anyway.) Just run it as is. It's news. Report it. And while you're at it, continue to ignore every point and link brought up in these comments.

Philip Jones: Thanks Joe, I think we are done here. Appreciate the comments as always.

Joe sez: I want to thank all of you writers for your courage in facing down The Bookseller. Each one of you risked retaliation and potential damage to your career to comment in a public forum.

See what I did there? Sounds silly in that context, don't it?

So with the paint still wet on the "can't The Bookseller report both sides" appeal, The Stenographer--I mean The Bookseller--jots down Preston's latest nonsense without bothering to even try getting an opposing viewpoint.

If you didn't follow the above link to the view from nowhere, here's the gist:

What data is missing in the Preston piece? Does this missing data amount to bias?

The major effect of the view from nowhere leads large groups of people to make bad decisions. So is The Bookseller actually reporting the news, or by omitting any sort of objectivity implied by detailing contrary viewpoints, is it simply bias masquerading as journalism, which leads to many people getting the wrong impression and making bad decisions?

Reporting that Amazon Anonymous exists, without viewing Amazon Anonymous with a critical, objective eye, is doing readers a disservice. If all they're exposed to is biased nonsense, they begin to believe the nonsense.

But is Preston's nonsense really nonsense? Does Authors United have a good shot at encouraging a Justice Department investigation of Amazon? (And could The Bookseller have asked Preston about Hachette's previous encounter with the DOJ? Wan't that relevant? Isn't that newsworthy?)

Remember that attorney, Paul Biba, that I mentioned above? Let's talk to Paul...

Joe: You're a former a corporate attorney. Can you explain what an antitrust compliance program is?

Paul: Most, if not all, large corporations have ongoing training programs for their personnel in regards to legal matters. For example, I have taught courses in antitrust, sexual harassment, discrimination, occupational safety and health, and others. These courses are part of a company's internal compliance program to ensure that its employees comply with the law and are familiar with the penalties, both personal and corporate, that can arise from non-compliance with the law. For example, filling out a form, such as a required reporting of pollutant emissions, with false information can result in huge dollar penalties against a company and the employee involved has committed a felony and can go to jail. Employees need to know this.

Just as in other areas, antitrust training is given to employees so that they have some idea of what the laws mean and what they should not do. For example, don't have private meetings with competitors because this could lead to the implication that you are price fixing. This training has three aims: first, to prevent illegal action from taking place; second, to try to ensure that employees do not become personally liable for what they do; and finally, if an illegal act occurs, to demonstrate to the government that the company made a good-faith effort to prevent the act and so should not be penalized because of the employee's actions. In the antitrust area the courses I gave lasted about 2 hours and would be given every year, or every other year, to every management employee. Their attendance would be recorded in their personnel file.

Joe: What are some things that companies need to look out for so they don't run afoul with antitrust law?

Paul: As a practical matter the most common antitrust violation is that of competitors getting together to fix prices - just what the publishers did, in point of fact. The other antitrust violations are rather esoteric and don't occur very often. Avoiding this problem is very simple. Don't meet with competitors, don't discuss prices with them, etc. All pretty obvious.

Joe: Is Amazon a monopoly? A monopsony? Are either illegal? How would you categorize Amazon?

Paul: No, Amazon is not a monopoly. There are plenty of competitors in the book and ebook arena - B&N, Kobo, Smashwords, etc. If Amazon were a monopoly it would have put these guys out of business. A monopoly is NOT illegal. The illegality comes in GETTING the monopoly. If you get a monopoly by legitimate pricing techniques, unique product, good customer service, etc. then that is just fine. If you get the monopoly by predatory pricing or other illegal activity then that is what is illegal, not the monopoly per se.

Monopsony is not part of antitrust law. It is where there is a predominant buyer to the exclusion of others. This concept has been dredged up by commentators from the world of economics, and it may show that the user knows his economics and so he should be impressive, but it also shows that the user doesn't know much about legal stuff.

I would categorize Amazon as a typical large business that uses normal, everyday business practices, just like the businesses I have worked with all my life. What makes Amazon unusual are two things: first, they are so good at what they do. Second, in the publishing area, what they do is so different from that the publishing industry has done over the centuries that it is a complete mystery to those involved in the industry. I am continually amazed that the publishing industry is astonished by Amazon's activities. I've been to enough conferences with the top execs of the publishing companies to see that they somehow think that the publishing business is a special, unique thing that is unlike any other business in the world - and should be treated as such. Amazon doesn't buy this and so it has become the publishing industry's bugbear.

Joe: What is predatory pricing? Is Amazon engaging in predatory pricing?

Paul: Predatory pricing, to make it simple, is when you price a product so low that it drives competitors out of business. Generally, that means pricing below your cost. To be honest, this doesn't happen too often because doing it hurts the seller who has to have pretty big coffers to sustain it. Amazon is clearly not engaging in predatory pricing because one can see many other sellers selling the same stuff at similar prices. To be "predatory" Amazon would have to sell most, or all, of its books and ebooks at prices so low that no other company could possibly compete. This is clearly not happening.

On the whole predatory pricing is not a viable antitrust theory any more. This is because the Supreme Court has set a very high bar for proving it (because by lowering prices the consumer is actually benefited) and, as a practical matter, not many companies can afford to do it.

Joe: Is squeezing suppliers against antitrust law?

Paul: Absolutely not, unless the squeezing is done as part of a deliberate attempt to get a monopoly. If you are just squeezing to get profit - more power to you! This is another area where the insular hothouse of publishing astonishes me. In business, everyone squeezes everyone, all over the world. But the publishing industry doesn't understand this, or somehow thinks it should be exempt because it is "special". My primary area of expertise is international transactions. I've worked in over 50 countries for about 45 years (now retired, though) and I have never seen, anywhere, such moaning and groaning about standard business practices as I have seen in the publishing industry. The very fact that they got caught in the price-fixing debacle is proof that they, and their lawyers, had no idea how the world worked. They are part of the world, so welcome to being squeezed!

Joe: Can this be taken as evidence that Amazon is pricing items so low that no one else can compete, and indeed they are trying to become a monopoly?

Paul: Absolutely not. Amazon is currently making huge capital expenditures in infrastructure, warehouses, acquisitions, increasing Amazon Web Services, etc. They might be selling stuff at a huge profit, but spending so much that they run a loss. The loss, alone, is evidence of nothing.

Joe: Can you imagine a scenario when Amazon would be investigated by the DOJ? What would Amazon have to do to draw their negative attention?

Paul: Quite honestly, given Amazon's current practices I can't think of one. On the other hand, antitrust prosecutions vary with the political climate, so who knows what the future will bring. Amazon would have to do something pretty obvious, and egregious, to be prosecuted.

Joe: Hachette has finally reached an agreement with Amazon, it it seems like they've accepted the same terms as Simon & Schuster, which managed to close a deal relatively quickly. What’s your takeaway?

Paul: My takeway has been taken away by Hugh Howey in his two recent blog posts: The Reason for the Delays, goo.gl/PbV5Jr and Amazon and Hachette Come to Terms, http://t.co/VQDru1Dwjx

Joe: I've called the Big 5 (formally Big 6) a cartel and an oligopoly because for decades they have controlled paper book distribution. Their contract terms and royalties for authors are practically identical and notoriously one-sided, because publishers have been the only practical way for authors to get into bookstores and reach readers. They are also one of the only products that prints the MSRP on the product itself, and these prices are pretty much lockstep from one publisher to the next. They have essential decided which authors get published, and by extension which books get read by the world. Do you think the terminology fits, and what is the DOJ's view on oligopolies?

Paul: A cartel is illegal in the US (but not in many places overseas) if it results in the members acquiring a monopoly and shutting everyone else out of the market. I think you make some good points about the publishers being a cartel, but it would be very hard, if not impossible, to prove. You would have to find evidence that they all conspired with each other to do all the things you mentioned in order to monopolize the publishing industry. If they just copied each other, as opposed to deliberately getting together like they did in price fixing, then there would be no illegality. Finding intent and concerted action would be hard. The term oligopoly would fit, but just like a cartel, it would have to be a concerted action among all the members to create it for it to be punishable. I take the following from Wikipedia, which I found rather interesting:

The television and high speed internet industry is mostly an oligopoly of seven companies: The Walt Disney Company, CBS Corporation, Viacom, Comcast, Hearst Corporation, Time Warner, and News Corporation.

Healthcare insurance in the United States consists of very few insurance companies controlling major market share in most states.

Anheuser-Busch and MillerCoors control about 80% of the beer industry.

Joe: I believe the Big 5's insistence on controlling ebook pricing, and keeping those prices high, is to protect their paper cartel. The Hachette/Amazon dispute was less about Amazon wanting bigger margins, and more about Hachette's fear of readers buying more ebooks than paper, essentially disintermediating publishers. Thoughts?

Paul: I have long been puzzled by the publishers insistence on keeping pricing high. It makes no commercial sense, especially as Amazon has always agreed to pay the publisher's price even if Amazon discounted the book. Given the strange nature of the industry, I wonder if there is not some "metaphysical" reason for this. A few years ago I attended a presentation by the President of one of the big 5. She specifically mentioned that ebook prices had to be high because otherwise the print book would be "devalued". Everyone in the audience, who were all from the publishing industry, nodded and smiled in agreement. At question time I specifically asked her what she meant by "devaluing" the book. She couldn't answer. She said that books were important and had great cultural value and that it was important that this be maintained. Made no sense to me, but she was serious. Given the vast majority of books the big 5 publish are mass market crap, I wonder what was going on in her mind. She was very sincere in what she was saying and I wonder if this doesn't have something to do with their attitude. All the execs in the industry have spent all their careers in it, so they have to have become rather inbred.

Joe: Many authors, and many in the media, attacked Amazon for their treatment of Hachette authors during the negotiations. Amazon had no contract with Hachette during much of that period, yet they were called bullies for harming authors. Setting aside the fact that Amazon tried on three different occasions to assist Hachette in compensating authors during negotiations, and was rebuffed by Hachette and Authors United, which entity do you believe was responsible for harming authors, Amazon or Hachette?

Paul: Amazon has no obligation to Hachette or authors. It's main obligation is to its shareholders. It was trying to do get the best deal it could and I see nothing wrong with this.

Joe: Do Hachette authors have a legal argument that their publisher acted in bad faith during negotiations with Amazon?

Paul: Very interesting question. I think a legal argument could be made that Hachette has an obligation to the authors because it is Hachette who is paying them through royalties and the generation of these royalties is primarily up to Hachette. Thus Hachette is obligated to act in the author's best interest, even if that might not comport with its own. I have very little knowledge of publishing law and the law surrounding royalties so I'm not competent to opine on this. I bet you could find a law firm to file a class action suit, on a contingency basis, alleging this, though!!

Joe sez: Thanks, Paul

I began to do some basic antitrust research, starting with The Sherman Act and Clayton Act, which led to Robert Bork and his book The Antiturst Paradox.

Bork argued that the original intent of antitrust laws as well as economic efficiency make consumer welfare and the protection of competition, rather than competitors, the only goals of antitrust law.
Bork's book was cited by over a hundred courts. Further digging led me to the blog of economist Don Boudreaux. Don did an expert takedown of Paul Krugman's anti-Amazon NYT post (Barry and I touched on the Krugman post ourselves).

I don't profess to understand economics any more than I understand law, but as a layperson I picked up these nuggets:

Low prices invariably reflect superior efficiency rather than monopoly design. To put it bluntly, plaintiffs in predation cases are firms that prefer to compete in the courtroom rather than in the marketplace.

Even if a predator manages to run existing rivals out of business, newentrants will emerge once the predator starts trying to recoup its price-warlosses by charging monopoly prices. This new competition keeps thepredator from recouping the losses it necessarily incurred by pricing belowcost during the predation period; hence, the threat of new entry is generallysufficient to keep firms from predatorily pricing in the first place.

That last bit helped it gel for me.

Imagine a lion who wants complete control over a territory, so all the prey becomes his and he won't have to work so hard to hunt. To drive out other predators, he ruthlessly and efficiently--at great cost and energy to himself--out-hunts every other predator in the territory and staunchly defends it. Other predators, who now have nothing to eat, leave the territory.

So now the lion can relax and enjoy the spoils of his labors, right?

Wrong.

The moment the lion gets lazy, other predators will creep back into his territory and challenge him.

So WTF is Preston trying to pursue with the DOJ, other than perhaps attempting to save face?

Amazon isn't a monopoly. And even if it is, monopolies aren't illegal.

Monopsonies aren't part of antitrust law.

Predatory pricing is a boogeyman that can't actually exist, because it is unsustainable. Let's look at Wal-Mart, which has put countless mom and pop shops out of business, and once it no longer had competition in those areas, it raised prices.

Except Wal-Mart doesn't do that. If it did, the mom and pop shops would come back and undercut them. So prices stay low, which benefits consumers, which is what Bork said antitrust law exists to do.

So what's the TL;DR version?

Douglas Preston doesn't like change, is afraid of the future, and blames Amazon. He hopes the DOJ will get involved. They won't. So he whines to The Bookseller, and they report it without any opposing viewpoint. It's all a big non-issue that shouldn't get any media attention.

But it did get media attention. And I just wasted half my day replying to it because somebody needs to.